Note 10 - Income Taxes

9 Months Ended

Sep. 30, 2011

Income Tax Disclosure [Text Block]

10.           Income Taxes

Flushing Financial Corporation files consolidated Federal and combined New York State and New York City income tax returns with its subsidiaries, with the exception of Flushing Financial Capital Trust II, Flushing Financial Capital Trust III and Flushing Financial Capital Trust IV, which file separate Federal income tax returns as trusts, and Flushing Preferred Funding Corporation, which files a separate Federal and New York State income tax return as a real estate investment trust.

Income tax provisions are summarized as follows:

	For the three months					For the nine months
	ended September 30,					ended September 30,
(In thousands)	2011		2010			2011			2010
Federal:
Current	$	4,959	$	5,336		$	13,825		$	14,446
Deferred		140		2,155			(250	)		744
Total federal tax provision		5,099		7,491			13,575			15,190
State and Local:
Current		1,564		2,410			4,316			4,876
Deferred		93		(9,375	)		(86	)		(9,504	)
Total state and local tax provision		1,657		(6,965	)		4,230			(4,628	)
Total income tax provision	$	6,756	$	526		$	17,805		$	10,562

The income tax provision in the Consolidated Statements of Income has been provided at effective rates of 40.0% and 3.5% for the three months ended September 30, 2011 and 2010, respectively, and 39.6% and 25.9% for the nine months ended September 30, 2011 and 2010, respectively.

The effective rates differ from the statutory federal income tax rate as follows:

	For the three months										For the nine months
	ended September 30,										ended September 30,
(dollars in thousands)	2011					2010					2011					2010
Taxes at federal statutory rate	$	5,917		35.0	%	$	5,304		35.0	%	$	15,744		35.0	%		14,297		35.0	%
Increase (reduction) in taxes resulting from:
State and local income tax, net of Federal
income tax benefit		1,078		6.4			(4,526	)	(29.9	)		2,750		6.1			(3,008	)	(7.4	)
Other		(239	)	(1.4	)		(252	)	(1.6	)		(689	)	(1.5	)		(727	)	(1.7	)
Taxes at effective rate	$	6,756		40.0	%	$	526		3.5	%	$	17,805		39.6	%	$	10,562		25.9	%

The three and nine months ended September 30, 2010 included a net tax benefit of $5.5 million due to a legislative change in the New York State and City tax bad debt deduction. Excluding this net tax benefit, income tax expense and the effective tax rate would have been $6.0 million and 39.8%, respectively, for the three months ended September 30, 2010 and $16.1 million and 39.8%, respectively, for the nine months ended September 30, 2010.

The Company has recorded a deferred tax asset of $33.0 million at September 30, 2011, which is included in “Other assets” in the Consolidated Statements of Financial Condition. This represents the anticipated net federal, state and local tax benefits expected to be realized in future years upon the utilization of the underlying tax attributes comprising this balance. The Company has reported taxable income for federal, state and local tax purposes in each of the past three fiscal years. In management’s opinion, in view of the Company’s previous, current and projected future earnings trend, the probability that some of the Company’s $30.9 million deferred tax liability can be used to offset a portion of the deferred tax asset, as well as certain tax planning strategies, it is more likely than not that the deferred tax asset will be fully realized. Accordingly, no valuation allowance was deemed necessary for the deferred tax asset at September 30, 2011.